In order to enhance the utilization of magnetic nanoparticles in biological systems, it is important to develop a fundamental understanding of the interactions that take place between the two systems. Magnetic nanoparticles are of particular interest for applications such as transfection, biodetection, and targeted drug delivery to name a few. The goal of this research was to study the effect iron oxide nanoparticles have on cellular growth and function, as well as to improve the particles' stability and biocompatibility in aqueous and biological media. Particle synthesis consisted of producing magnetite using the Massart method. Composite iron oxide nanoparticles produced under combustion synthesis were also studied. Previous results indicated that the inorganic nanoparticles formed small aggregates in microbial growth media, thus influencing particle stability. To mitigate this problem, a stabilizing polymer known as gum arabic was tested to control particle size and prevent further agglomeration in aqueous and growth media. Results showed that gum arabic greatly improved particle stability. Growth studies measured the influence of the nanoparticles on cell proliferation using both M9 and Luria Bertani media to track growth of Escherichia coli (E. coli) in minimal and rich growth conditions. In addition to E. coli, prostate carcinoma cells (cell line DU145) were cultured in the presence of the treated nanoparticles to determine whether gum arabic improved the uptake of the particles in mammalian cells. Fluorescent microscopy was incorporated to detect the location of the nanoparticles in or about the cells by labeling the gum arabic with fluorescein isothiocyanate (FITC). The results illustrate the potential use of gum arabic as a surface-modifying agent to improve magnetic particle stability, as well as to promote nanoparticle uptake by mammalian cell cultures.